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(FINANCE) a type of bank that raises money for clients by issuing stock (see [initial public offering] and follow-on offering) or by issuing bonds. Prior to the repeal (1999) of the Glass-Steagall Act, [commercial] banks and investment banks were required to be separate entities. Subsequently, the law was changed so that a bank holding company could own a commercial bank and an investment bank. Outside of the USA, commercial banks have always been allowed to engage in underwriting securities. Investment banks usually sell shares of stock on a major exchange, such as the NYSE or NASDAQ. They give a fixed amount of money to the borrower, but also an agreed-upon number of shares, so if the shares soar in price [after the] public offering, then the investment bank makes an immense amount of money. Investment banks also underwrite other kinds of securities, such as bonds.
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